Are You Ready For More Flexibility, More Guidance?
On Thursday, the NCUA finalized regulations eliminating the 5% aggregate limit on fixed assets for federal credit unions. It also established a single time period of six years from the date of a property’s purchase for an FCU to at least partially occupy the premises. These changes would have been important enough on their own, but there is even more going on here than meets the eye.
When NCUA first proposed doing away with its fixed asset rules for FCUs, it proposed replacing them with a requirement that credit unions implement a fixed asset management program (FAM). Commenters , including the Association, welcomed NCUA’s willingness to do away with the nettlesome fixed asset cap but expressed concern that the FAM requirement would end up being almost as burdensome to credit unions as the existing regulation.
In an example of the impact that comment letters can have, particularly when a three-member board is divided, NCUA eventually agreed to not only do away with the fixed asset cap but to eliminate the FAM requirement. This might sound like incredibly dry stuff, but it is yet another indication that NCUA is fundamentally re-examining its regulatory approach away from prescription towards greater flexibility in complying with safety and soundness mandates. The preamble states that the amendments reflect the Board’s recognition that it should give credit unions relief from a prescriptive limit on fixed assets but it stressed that investments in fixed assets “are, and will continue to be, subject to supervisory review.”
NCUA will attempt to achieve a balance between oversight and flexibility by issuing more guidance. Are we simply replacing one set of prescriptive rules with another that gives examiners more flexibility to decide what constitutes safety and soundness? This is the part of the preamble that I find so important. .
In response to these concerns, NCUA explains that the purpose of supervisory guidance and other interpretive rules is to advise the public of the Agency’s construction of statutes and rules that it administers” It further explains that “supervisory guidance regarding FCU ownership of fixed assets is not intended to supplant FCU’s business decisions or to impose rigid and prescriptive requirements on FCUs on the management of their investment in fixed assets.”
The rationale in the preamble is similar to NCUA’s rationale for radically altering the MBL regulations. It may take some getting used to for those of you who have grown used to complying with very specific mandates. As for those of you who are looking forward to increased flexibility, be prepared for thorough discussions with your examiner explaining why an approach taken by your credit union satisfies safety and soundness concerns.
It is an experiment well worth trying. Its success will depend not only on examiners but on the willingness and ability of credit unions to create individualized compliance programs Here is the final regulation.
NY’s Criminal Exacta
With Saratoga opening this past Friday maybe it’s only fitting that federal prosecutors secured an exacta last week First, Deputy Senate Majority Leader Tom Libous of Binghamton was convicted of lying to federal investigators about his efforts to obtain work for his son from lobbying firms. On Friday, State Senator John Sampson of Brooklyn, who once held the position of the Senate’s top Democrat, was convicted of Obstruction of justice charges. Both Senators automatically lose their seats.
With Republicans holding a one seat majority in the State Senate-Not including the Independent Democratic Conference- and the Governor apparently committed to pushing hard for democrats to win the Libous seat when a special election is called, the political class is looking forward to the first major election since John Flanagan was named Majority leader following the indictment of Dean Skelos on corruption charges earlier this year. Cuomo was quick to praise Barbara Fiala, the former Department of Motor Vehicles commissioner who has announced that she will be seeking the Democrat nomination.